Air Italy reports a massive financial loss after rebranding

Posted on August 19, 2019 by in Qatar Airways, Travel Deals, Travel News

Air Italy is an Italian airline that Qatar Airways has a 49% stake in. The airline used to be known as Meridiana but with funding from Qatar Airways, the airline relaunched in March 2018. Following the launch up with new planes and a new business plan. Since the rebranding Air Italy had less revenue, flown fewer miles and had fewer customers.

The rebranding of Air Italy

Air Italy, previously known as Meridiana, has had many big financial losses over the years. They lost 52 million euros in 2015, 46 million euros in 2016 and 57 million euros in 2017. The relaunch of Air Italy required significant investments, some of which were necessary to resolve Meridiana’s historic problems. In 2017, Qatar purchased 49% of Air Italy.

The controversy behind the scenes

Qatar was engaged in rapid U.S. growth over the years, which has since been slowed by diplomatic pressure from the Trump administration. Air Italy’s U.S. plans faced severe backlash by Washington lawmakers who say it violated a commitment made by its shareholder, Qatar Airways, not to add new flights to the U.S. market. Qatar Airways denied these accusations, saying they were a minor shareholder.

“When the Trump administration negotiated an agreement with Qatar earlier this year to protect American jobs and restore fair competition to international aviation, the Qatari government agreed that its state-owned airline would not launch future fifth freedom flights to the U.S,” Scott Reed, campaign manager for the Partnership for Open & Fair Skies said in a press statement

Fifth freedom flights enable carriers to fly between two foreign countries. Air Italy is seen as Qatar Airway’s way to go around the agreement. Basically, Air Italy seems like only a proxy for Qatar Airways.

“Qatar is using the tiny, close-to-defunct Air Italy to skirt its promise to the U.S. to not add so-called ‘Fifth Freedom’ flights to the U.S,” Ed Bastian, CEO of Delta said in a press statement.

Air Italy financial loss

The airline made some bad decisions with routes, like trying to launch flights to India and Thailand. Routes to Mumbai and Delhi were abandoned within days of starting, while service to Bangkok didn’t last. The completely new business model of the airline of operating out of Milan, rather than out of Palermo or Naples has taken a while to build up. The 737 MAX groundings have impacted their performance on short-haul flights in the past several months. The fleet size was increased to 15 from 14 the previous year. Unfortunately, that includes three 737 MAX planes, which are grounded. The airline has also reduced charter flying, which led to a loss of about 65 million euros. With all that added up, they reported a financial loss of 164 million euros in just one year after the rebranding.

“Our performance is better than expected and we expect to grow further.” An Air Italy spokesperson said to the Italian media.

*Passengers that have flown Air Italy expressed in millions. Source: Corriere

They are very hopeful that their five-year business plan they intend on implementing will improve their financial state and bring growth in the years to come. The loss is blamed on outside factors and some mistakes on their part. But, the question remains, will they be able to rebuild after such a massive financial hit or was their new business plan just too ambitious to work.